So what is the cost to us taxpayers and non-ZEV buyers to subsidize this whole electric car endeavor?

"John Norris (AngryDrifter)" (angrydrifter)
11/14/2015 at 10:46 • Filed to: None

For electric car purchasers there are federal and state tax subsidies that tax payers have to cover.

For electric car manufacturers there are federal and state grants and tax breaks that tax payers have to cover.

I am pretty sure it adds up to over $5 billion, and perhaps over $10 billion. That’s spread over a number of years so it may be $250 million to $1 billion a year if my numbers are in the ballpark.

There are also some state laws that force car manufacturers to manufacture, or buy credits for, zero emission vehicles. I suppose that’s not called a tax, but it certainly raises the cost of a non ZEV for the rest. So effectively it’s a tax on the rest of the automotive purchasing population.

There have also been some state tax incentives for homeowners to help pay for electrical wiring to support electric car charging. The taxpayers have to pick up the tab for this as well.

With all the weirdness in the federal and state laws it’s rather nebulous and very hard to account for. Of course the questions is, has it been worth it?

As is the case with most well intended government endeavors there are consequences. A used Nissan Leaf is rather worthless. When it was new the rest of us helped make it cheaper for the buyer.

There are other consequences too.

DISCUSSION (12)

PS9 > John Norris (AngryDrifter)
11/14/2015 at 14:44

I am pretty sure it adds up to over $5 billion, and perhaps over $10 billion.

No, that’s not actually possible. The 3 best selling electric cars in the united states right now are 1) The Nissan LEAF 2) The Tesla Model S and 3) The BMW i3. The S and the LEAF also lead the market for electric cars globally. There are others too like the Focus, Spark, Fit and Mitsubishi MiEV, but they all have microscopic volume (>1000 cars/year or less) compared to the market leaders.

Kinja'd!!!

We actually know how many LEAFs , Model Ss and i3s exist in the united states right now, and $10B is enough to buy every single one of them at MSRP. The subsidy is a fraction of that price, not all of it. How can the total cost of the subsidies for electric cars eclipse the cost of said cars? That doesn’t make any sense. There’s no way the program cost is anywhere near $10B.

It’s not a good idea to immediately follow up one estimate for the cost of something with another that is 100% more than the original. It gives away the impression that no real math was done in reaching these numbers. ACES signed in 2009 determine what kind of subsidy a PEV can get, up to a maximum of $7,500. Not every single PEV will qualify for the maximum, but we will pretend for the moment that they do. Given how many PEVs were sold between then and now (~383k cars between 2011 and November 2015) we can see a total program cost of about $2.8B over 4 years. No where near $10B, not even close to $5B.

But what about the states? Only 14 of the 50 states in the union provide subsides and tax breaks for buying PEVs , and most of them are $2.5k or less. The state level program cost here will be considerably less than $2.8B.

But the actual cost doesn’t matter, right? The point is us taxpayers have to subsidized these greenpeace anti-american hippie mobiles without getting anything in return, and we should be mad about that...right? There are some non-trivial problems with this conclusion;

The Model S, Focus Electric, Nissan LEAF, Volt, and even the i3 are built right here in the United States. Ask someone who works at the factories that make these things whether or not EV and PHEV subsidies provide anything to them, and their answer will be an unequivocal ‘yes, of course’. Taking the LEAF and the Volt down a bracket in price undeniably contributed to their growth in the market and the LEAFs status as an electric car market leader. $2.8B + maybe $800M or so from the states in exchange for guaranteed growth in a previously static market segment doesn’t seem all that bad an investment to me.

Hey, how about those gas prices? Surely you don’t think the suppression in the cost of gas lately is just providence, right? It is lower than industry projections said it would be at this time because the world is buying less fuel, and that is happening because cars on the whole consume less fuel than they did in years past. Every country in the G8 provides some kind of subsidy for PEVs, because reducing their dependence on fuel over time is a top priority globally for obvious reasons.

The i3 is $42k. The Model S is $100k. Even the humble leaf at $22k is well out of reach for anyone who doesn’t make enough to pay income taxes. The taxpayers aren’t just the one’s paying for the subsidies; they’re also the ones using them to buy these cars. It’s hard for me to be outraged about a program designed to make sure only payees see the benefit.

gmporschenut also a fan of hondas > John Norris (AngryDrifter)
11/14/2015 at 16:58

Didn’t do any research?

A used Nissan Leaf is rather worthless.

“ #9: The Batteries Have a 100,000-Mile Warranty

Of course, all batteries degrade over time, but the Leaf’s lithium-ion pack comes with an eight-year, 100,000-mile warranty. According to Nissan’s estimates, even after a decade of use, the Leaf’s batteries will likely maintain 70 to 80 percent of their capacity. The company also points out that since lithium doesn’t chemically change over time, the batteries are completely recyclable.” http://www.popularmechanics.com/cars/hybrid-el…

John Norris (AngryDrifter) > gmporschenut also a fan of hondas
11/14/2015 at 18:38

Yes indeed, I did do some research. Thanks for asking.

2011 - 2013 Nissan Leaf’s were about $35,000 MSRP new. There are plenty at $10,000 - $12,000 on ebay (buy it now price) with only 20,000 - 35,000 miles. As expensive as used car prices seem to be, that to me, is rather worthless.

A nicely equipped 2012 Nissan Sentra had about a $20,000 MSRP. They appear to be selling about the same $10,000 - $12,000 with similar mileage as the Leaf on ebay.

There are a ton of Sentras out there. Yet the used Sentra price has held up far better than the used Leaf. For a $35,000 car with only 20 - 25k miles on it the Leafs are rather worthless.

John Norris (AngryDrifter) > PS9
11/14/2015 at 19:33

No, that’s not actually possible.

Well in the end you supported my “... over $5 billion”. And I think we’ve spent about that to date.

But I’ll gladly share some of my math and some references. And it’s not far from yours, and it supports my statement.

From this I got this federal spending:

“The administration has pledged $2.4 billion in federal grants to develop next-generation electric vehicles and batteries.”

From this I got this federal subsidizing:

“Buyers of plug-in hybrids and electric cars benefit from a tax credit of $2,500 to $7,500, depending on the size of the battery in the car. . . . The incentive begins phasing out after an automaker sells 200,000 vehicles that are eligible for the credit.”

If you assume the middle tax credit at $5,000 for 200,000 units that’s up to $1 billion, per manufacturer, before it starts to phase out. As you point out we are not yet at 200,000 units for the more popular products, but we are getting in the neighborhood. Thus we are probably in the neighborhood of $1 billion in tax credits. And we are certainly not finished.

Then there are some state tax credits for manufacturers.

From this I got this state subsidizing:

“Inside Nevada’s $1.25 billion Tesla tax deal”

So with $2.4, plus $1.0, plus $1.25, plus whatever the states subsidize for buyers I found it pretty easy to get over $5 billion, for up to right now; and we of course are not yet done.

With your calculation you had $2.8 bil in fed + $800k or so, and something less than $2.8 bil in state. So you are in the same neighborhood as me; for where we are at right now.

So if you think my $10 billion number is too high what do you think the final number will be, since we are over $5 billion now?

Regarding this:

The taxpayers aren’t just the one’s paying for the subsidies; they’re also the ones using them to buy these cars. It’s hard for me to be outraged about a program designed to make sure only payees see the benefit.

It’s easy for me to be outraged. After all, I am the angry drifter. Plus almost all government selections of winners and losers ends up being a loser for the consumer. Let the free market decide.

In the end the government is spending the consumers money on behalf of the consumer. It is always more efficient for the consumer to decide what the consumer wants than the government to decide what the consumer wants. To assume otherwise means somehow the government is better at spending the consumers money than the consumer.

PS9 > John Norris (AngryDrifter)
11/15/2015 at 06:51

Well in the end you supported my “... over $5 billion”.

No, I didn’t. 2.8B from the fed, maybe $800M or so from the states. That’s a maximum of $3.6B, not ‘over $5B’ and nowhere near $10B.

But I’ll gladly share some of my math and some references. And it’s not far from yours, and it supports my statement.

You say this like you’re doing me a courtesy, but this is something you are required to do for an article who’s content and conclusion hinges on the value of a number. There are places where the audience will be too busy being outraged to actually pick through the premise and check for factual errors, but Oppo is definitely not one of those places. A ‘maybe’ is not going to cut it here; if your don’t show your math and citations, your audience will do it for you, and the result won’t always be desirable.

“Inside Nevada’s $1.25 billion Tesla tax deal”

Right there in the article it says Tesla will invest $3.5B in manufacturing and real estate for Nevada. That factory is bringing in thousands of very well paying jobs into the state as well, which is good for every single business large and small located anywhere near that factory. The economic impact of this factory is valued by Nevada at $100 billion dollars! Given all that, you can’t seriously assert this particular deal as a negative to Nevada tax payers. Show me some other place in the economy where I can get an almost 100x ROI.

So with $2.4, plus $1.0, plus $1.25, plus whatever the states subsidize for buyers I found it pretty easy to get over $5 billion, for up to right now;

The Tesla deal illustrates what is problematic about asserting the cost of a factory subsidy as a negative to taxpayers. The gigafactory cost to Nevada so far is(-$1.25b+$3.5B), so they begin ahead by $2.25B, and will gain another $100B in economic activity for the state after the factory is built. This is why I didn’t just ‘add in’ the grants for factories and businesses, because they generate revenue in a way a subsidy to buy a Volt does not. They are not comparable.

With your calculation you had $2.8 bil in fed + $800k or so, and something less than $2.8 bil in state.

No, that is not what was written there. Read it again.

Almost all government selections of winners and losers ends up being a loser for the consumer. Let the free market decide.

The market is dumb. It’s not a person. It is only concerned about what is profitable today, right this very second. It doesn’t contain wisdom, it cannot plan ahead, it cannot consider anything beyond what is profitable.

‘Let the free market decide’ is not a governing policy. It is the absence of it. once upon a time, we did ‘let the market decide’ what sort of cars should be driving. They picked giant lead sleds powered by gas guzzling V8s. Sound fun? It was, until this happened ;

Kinja'd!!!

If your domestic energy and economic policy is equivalent to “¯\_()_/¯”, then you have no hope of mitigating the coming changes that will have an overall negative impact on the nation you govern. Which is why no one who is governing a nation right now is doing that.

Have you ever talked to someone on the frontpage about energy policy and the state of this planet’s natural resources? I have, and J-MFn-Christ the density there approaches depleted uranium. They fashion themselves as more knowledgeable and experienced than people who’ve spent their entire lives working in the oil industry and collecting the relevant information. Seriously. ‘Letting the market decide’ means those same people get control of our domestic energy policy, which also means not getting the fuel efficient cars we need on the roads until a little bit after they are needed. It will be too late by then.

The reason almost all the nations in the G8 invest in PEVs and hybrid cars, plants and associated technologies, and why every major manufacturer of cars on earth has billions tied up in R&D of those same technologies and products either in development or in the pipeline at every segment of the global automotive market from the bottom (LEAF) all the way to the top (918, P1) is because we need to act now , and everyone knows it.

John Norris (AngryDrifter) > PS9
11/15/2015 at 10:01

That’s a maximum of $3.6B

Thank you for clarifying. If I understand correctly, that is ‘to date’. I didn’t see you provide a prediction for the final number.

Show me some other place in the economy where I can get an almost 100x ROI.

You appear to be showing ROI for a government entity based on taxpayer investment turning into gross sales, rather than ROI for a business where investment needs to turn into net profit. For a government taxpayer investment calculated that way, you better get a huge return. But your math is wrong. The Tesla Nevada calculation is way more than 100%.

You definitely are a fan and passionate, and seem to know a lot on the topic. There are more government investments that I haven’t yet referenced. Perhaps you can justify the taxpayer funds that went to Fisker Karma. Much like the state funding, it’s hard to see exactly what the cost is. I’ve seen $149 million and $392 million. I’m not sure which is correct. But it does appear to be money down the drain. It was advertised as a jobs program until the jobs appeared to be going to Finland.

The market adjusts quickly. It did in 1973 and has continued to adjust since.

As oil recently got cheaper electric cars with current technology became far less attractive. The government investment in electric cars and batteries becomes less valuable. The forward looking government planning didn’t foresee the market impact of fracking, only peak oil and global warming. You can do whatever planning and investing you want, and do that based on what you know now, but the landscape will change, the ‘dumb’ market will adjust, and the market will rule the day.

Well I’ll go a little further with this, as I see it differently. Buyers buy what they want today, that’s what drives the market, not profit. For those with a profit motive, they are incentivised to best meet the market need, current and future. If sellers have electric cars or gas guzzling V8’s or turbo diesels; the best positioned sellers to meet the market demand will succeed. Businesses invest and take risk. My argument is that that risk should be born by voluntary private investment, not burden to the taxpayer. Investment in electric cars was a big risk. Perhaps it will pan out, perhaps not.

PS9 > John Norris (AngryDrifter)
11/15/2015 at 19:40

You appear to be showing ROI for a government entity based on taxpayer investment turning into gross sales, rather than ROI for a business where investment needs to turn into net profit.

How are these two sentences not explaining the same phenomenon? Both businesses and government organizations will be interested in more ‘gross sales’. That’s where the profit (and the opportunity for taxation) will come from.

your math is wrong. The Tesla Nevada calculation is way more than 100%.

Where did I say it was ‘100 percent’? The ‘x’ in ‘100x’ is a multiplier. The deal is worth almost 100 times what they spent on it, and they got their money back and then some right from the outset. It cannot be described as a loss because of this, even if Tesla fails and the factory has to be shut down.

Perhaps you can justify the taxpayer funds that went to Fisker Karma. Much like the state funding, it’s hard to see exactly what the cost is. I’ve seen $149 million and $392 million. I’m not sure which is correct. But it does appear to be money down the drain.

Fisker was awarded $592M in loans from the government , but was only able to draw $192M before having their line of credit frozen. All of their other funding came from private sources. This is the part where we are supposed to say, ‘See what happens when we let the government take risks with taxpayer money?’ right? Because this is also the part where I say, ‘In a global free market economy, investment is required if you want to see growth.’ That will be as true for Koch Industries as is will be for Washington D.C. Since economic growth is a top priority for every government in the G8 and beyond, all of them will be using taxpayer funds to try to spur growth in their nations. It sucks to lose, yes. But refusing the play the game means giving the wins (read; jobs and GDP growth) to somebody else.

The market adjusts quickly. It did in 1973 and has continued to adjust since.

Sorry, but that isn’t good enough. Peak oil and reduction in consumption are not the sort of problems we can wait for the market to react to. We need to start developing solutions to that problem now. The time and opportunity to react will not be available to us later; our third and forth generation products will need to be ready by then. It’s not good enough to start your first crack at developing ICBMs and Nuclear weapons after the asteroid has breached the atmosphere.

I will further explain what I mean; the lead time on a new car is something like 5 years, but significant improvements to the underlying technology are more like 90 years. The first hybrid vehicle appeared in 1900 , but a mass-market acceptable product would not appear until 1997, which was of course the Toyota Prius. A Prius that gets 100% better results than the ones we can buy today might mean another 90 years of research and development. The average age for a car on the road today is 11 years. That is the lead time for vehicle replacement in the US today.

Oil production will drop sometime in the future precipitously. We can either reduce our consumption, or face unacceptable and permanent increases in the price of oil. An Average of 100MPG would be a 5x increase over what it is today , but to actually achieve that, you need one hundred and ten years lead time! Minimum! Given that, we obviously cannot just wait until after this technology becomes necessary to start investing and developing it. In the free market, there is not investment without the incentive to profit, and right now, today at this very moment, there is no real incentive to try and build a 100MPG car. When it comes to large-scale problems like this that require many decades or centuries of lead-time to develop effective solutions to, it isn’t good enough to just wait for the problem to appear and for the market to react.

As oil recently got cheaper electric cars with current technology became far less attractive.

Oil did not just get ‘recently cheaper’. It isn’t providence or a happy coincidence. It is a consequence of us buying less oil in a market flush with supply, and that trend did not appear all on it’s own.

Kinja'd!!!

This graph of US oil consumption matches both the trend of increasing MPG in passenger cars I linked to earlier, as well as the rise of hybrids and electric vehicles that happened from roughly 2007-Now. You cannot make the claim that this trend is not at all related to the increased presence of said vehicles in the marketplace when it is a direct and natural consequence of it.

The forward looking government planning didn’t foresee the market impact of fracking

Well, I guess that’s what happens when the government adopts anti-regulatory policies and turns a blind eye to wrongdoing. Surprise; if you elect people who do not think forward to govern you, the government will not be forward thinking.

My argument is that that risk should be born by voluntary private investment, not burden to the taxpayer.

That’s not really possible. As I pointed out before, economic growth is a policy feature of every modern government on earth, and always will be forever. For the rest of your life, no matter where on earth you move to, you will not be able to select a person who will run the government without risking taxpayer money. It is part and parcel to process of governing in a capitalist system.

‘The government should be run like a business!’ is something I hear a lot, but I hear a lot of other claims associated with that as well. ‘The government should only engage in risk free growth!’ but that’s not how business works (because that doesn’t exist). ‘The government should take in less than what it spends!’ but that’s definitely not how a business works. ‘The government should be smaller!’ but the goal of a business is to grow big enough to push out rivals and seal up marketshare. It makes me think there are a lot of people out there who either don’t know what exactly they want from their government or what exactly a business is supposed to do.

Here’s the bottom line; growth in a capitalistic system requires investment, period. Economic activity on a modern scale is actually not possible without huge upfront and continued investments in infrastructure and education. You don’t get to have a modern economy without those things. Show me a country with no roads, schools, infrastructure, taxation or government presence, but with a modern economy that rivals the ones in the US, Russia, China and Japan. You will not find this country anywhere on our planet. The capitalists expect that stuff to be their already, and they’re not going to spend their money building it unless they are made to, even though it necessary for them to see any profit at all.

You would prefer Tesla to just build their factory and take on all of the risks by themselves, but you understand that they don’t actually have to do that, right? No one does. It’s not a requirement to build a factory and create jobs in the US. Do you honestly believe that China or Europe will turn down Telsa’s offer for $100B in economic activity in exchange for $1B or so in tax breaks to be refunded immediately in the form of $3.5B in investments in the local economy by Tesla? To say yes is to totally not understand why deals like this continue to happen on a global scale.

Investment in electric cars was a big risk. Perhaps it will pan out, perhaps not.

Here’s something interesting about the graph I posted; the drop in demand for gasoline on it represents a 16 quadrillion BTU loss in demand, assuming a very generous flat demand curve relative to 2007. A british thermal unit is equivalent to about 1055 Joules. A gallon of gas contains ~123 MJ of energy.

1.6*10 16 BTU is 1.688*10 19 Joules of energy. That is equivalent to about ~137B gallons of gasoline.

Kinja'd!!!

Gas wasn’t always $2/gallon. If you match the price of gas with the year of decline in demand and add them up , you can see the value to the american people has been a staggering four hundred and twenty two billion dollars between 2008 and 2011. That is a direct result of having a population of more fuel efficient cars on our roads. We don’t have to wait for anything to pan out; These policies of investment in fuel efficiency have paid for themselves and then some already, and every single consumer of gasoline in the us has seen the benefit.

John Norris (AngryDrifter) > PS9
11/15/2015 at 20:56

Where did I say it was ‘100 percent’? The ‘x’ in ‘100x’ is a multiplier .

Oops. Sorry about that. I read it as %.

John Norris (AngryDrifter) > PS9
11/15/2015 at 21:10

Show me a country with no roads, schools, infrastructure, taxation or government presence,

Okay, you went off the deep end here.

I believe government has a very important role; I’m just questioning how much it should be picking winners and losers in automotive propulsion. There are important roles for government that the market place cannot or should not lead.

John Norris (AngryDrifter) > PS9
11/15/2015 at 21:21

I will further explain what I mean; the lead time on a new car is something like 5 years, but significant improvements to the underlying technology are more like 90 years.

Sorry you built a bit of a strawman there. In fact you support my argument. The market didn’t really need a hybrid until 1973. Other than WWII gas was cheap and available. And it hasn’t become permanently expensive since. As a result the market hasn’t demanded it. If we were at peak oil, the market would likely have far more use for it, unless of course advances in other propulsion beat it out. The market can sort that out though. It will no matter what government investment occurs.

Did Toyota depend on government funding for development of their hybrid solution, or did they develop it at risk on their own funding?

John Norris (AngryDrifter) > gmporschenut also a fan of hondas
12/20/2015 at 19:20

Update. Here’s a 2015 Leaf with 00,009 miles on it for $16,700.

https://atlanta.craigslist.org/nat/cto/536710…

The sticker says $32,000. For whatever reason a used Leaf is rather worthless.

Kinja'd!!!

Pixel > John Norris (AngryDrifter)
01/14/2016 at 10:00

The market didn’t really need a hybrid until 1973.

And the first one came to market in 1997, 24 year later. Do we really want to be 2.5 decades behind the curve the next time we have an energy crisis?